WELL:CC - Is WELL Health Stock Still a Buy After Its Recent Surge?
2023-06-26 12:00:00 ET
After a challenging last year, tech stocks have witnessed strong buying this year amid easing recession fear and slowing interest rate hikes. Notably, WELL Health Technologies ( TSX:WELL ) is one of the top-performing stocks this year, with its stock price up 68% as of June 23. Its solid quarterly performances, geographical expansion, strategic acquisitions, and strong guidance appear to have driven the company’s stock price higher.
Amid the recent surge, let’s assess whether the uptrend in the company’s stock price could continue by looking at its recent performances and growth prospects.
WELL Health’s solid first-quarter performance
In the first quarter of 2023, which ended on March 31, WELL Health’s revenue came in at $169.4 million, representing a 34% increase from its previous year’s quarter. Solid organic growth of 21% and acquisitions drove its topline. The company witnessed substantial growth across the three segments, with Canadian patient services, US patient services, and SaaS and Technology services posting a year-over-year increase of 23%, 38%, and 47%, respectively. Besides, the company had 1.4 million patient interactions during the quarter, representing an annualized run rate of 5.6 million.
Driven by the topline growth, the company’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and adjusted net income grew by 14% and 58.4%, respectively. The company also generated an adjusted free cash flow of $10.8 million during the quarter. Amid its solid cash flows, the company has been able to lower its leverage, with its net debt to shareholder-adjusted EBITDA declining from 3.5 in the previous year’s quarter to 2.6. Now, let’s look at its growth prospects.
WELL Health’s growth prospects
Innovative product development offerings, growing internet penetration, and increasing adoption are expanding the telehealth market. Meanwhile, Grand View Research projects the global telehealth market could expand at a CAGR (compound annual growth rate) of 24% through 2030. WELL Health has launched an AI investment program focusing on artificial intelligence to develop and integrate next-generation tools, which could enhance patient experience and lower the administrative burden for the company.
Besides, the company and its partners made a strategic investment in doctorly GmbH, which will allow it to expand its footprint in Germany. Additionally, the company is focusing on increasing its footprint in the United States and Canada through strategic acquisitions, which could boost its financials in the coming quarters.
On momentum from its healthy growth prospects and solid first-quarter performance, WELL Health’s management raised its guidance for this fiscal. Now, the midpoint of management’s 2023 revenue guidance represents 23% growth from its previous year, while its adjusted EBITDA could grow by 10%. So, I believe the company’s growth prospects look optimistic.
Bottom line
Despite substantial buying over the last few months, WELL Health still trades over 50% lower than its 2021 highs. Its valuation also looks cheap, with its NTM (next 12 months) price-to-sales and NTM price-to-earnings multiples at 1.6 and 15.6, respectively.
Given its long-term growth prospects and cheaper valuation, I believe WELL Health will deliver multi-fold returns over the next 10 years. So, investors with long-term investment horizons can start accumulating the stock to reap higher returns.
The post Is WELL Health Stock Still a Buy After Its Recent Surge? appeared first on The Motley Fool Canada .
Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
2023